Oh, right, Martin Regg Cohn did one thing a good journalist does. He was able to procure a "secret" document. Getting a whistleblower to leak a document, and then exposing it in an article is the dream of journalism, right? Too bad he forgot about the whole "writing a factual article" part.
So, about this "secret" document. It was so secret that the restaurant association Restaurants Canada had access to it in August and used it to present to Ed Clark's asset advisory council. So secret that Twitter trolls knew about it in October.
You can access it here. Prepare to be underwhelmed.
I take back when I gave partial credit for good journalism. It seems that Mr. Cohn (or Mr. Regg Cohn, who the hell knows or cares) was among the last to know. Or he knew and sat on it for a long time. Why? So he could construct the perfect rabble rousing narrative, of course! I wonder if he had help in doing so.
I'll link to a reposting of this article, because The Toronto Star has received enough pageviews for this garbage. We don't need to be encouraging them to post more.
I suppose I'll tackle this FJM style. This should be pure torture. Cohn's article is in italics.
I have to stop right away. Here's a handy graphic depicting donations for the 2011 provincial election. Where are those high-rolling bulldogs of the Beer Store and CNB lobbies? All the way down in 9th place. Almost 1/10th of the contributions made by the construction industry. Also, that tiny bubble represents all breweries, wineries, and distillers in the province. TBS and CNB are nowhere to be found among to list of top companies contributing. Neither are Molson, Labatts, or Sleeman. The UCFW (which represents TBS employees, among tens of thousands of other food-related industry workers) are one of the largest unions, yet only the 4th highest contributors.Thanks to a whistleblower, we now have the secret details of how Ontarians are being hosed by The Beer Store with the wilful involvement of elected officials.
Before stocking up for the holidays, you can read why the province remains captive of a private quasi-monopoly in beer retailing that bankrolls the richest, toughest political lobby in the province.
Oh, I know what you're saying. That was 2011, what about the 2014 election? This article attempts to make it seem nefarious that Labatts gave $17,500 to Premier Wynne and $15,000 to Finance Minister Sousa. That seems small potatoes for "the richest, toughest, political lobby in the province" to give to the two most influential people on the issue. Also, as it turns out, doesn't seem to have done a whole lot of good. But I digress.
That's a lot of flowery and misleading language for someone who seems to be against such things.A still-confidential operating agreement lays bare the foundations of an inglorious cash grab that the big foreign-owned brewers who run The Beer Store don’t want you to know about. And what the government-owned LCBO is too embarrassed to show you.
It's always amusing to me when people lack such self-awareness. He accuses the agreement of using "Orwellian language" while he uses scare tactics, misrepresentation, exaggeration, and throws around words that actually mean something serious like "collusion" so cavalierly. He's fudding -- both definitions of the word.
The Beer Store and the LCBO have repeatedly refused my requests to disclose their mutual non-aggression pact, and it’s easy to see why. Dated June 1, 2000, the document confirms the folly of our Crown-owned LCBO acting on the orders of the Progressive Conservative government of the day (and the Liberal government of today, which is no less guilty).
Speaking of "Orwellian", Cohn derives the exact OPPOSITE intent of the agreement and presents that as fact. TBS sought out this agreement because the LCBO decided that they wanted a bigger piece of the beer pie, and as the governing body, they were able to do anything they wanted to get it.The 10-page document, authenticated by an LCBO source, details an arrangement that constrains growth in the LCBO’s beer sales to protect the effective retail monopoly of the ever unpopular — but forever profitable — Beer Store.
The LCBO was placing unreasonable restrictions on TBS. They were not allowing them to sell certain desirable products, and selling those products themselves to erode TBS' market share. Despite certain areas of Ontario exploding in population, they were not allowing them to open new TBS outlets.
Also, I'm sure that a document that detailed and enabled as much chicanery as Cohn's making this one out to would be longer than TEN PAGES. How long do you think a detailed master plan to control the Ontario beer market, fix prices, and restrain competition would be if it actually existed? A hell of a lot longer than TEN PAGES. Seriously. There is almost no content in this document. It takes Cirque de Soleil levels of acrobatics and contortions to twist this into a controversy. I guess you can do anything if you pander to ignorance well enough.
Why no questions about why the Tory government would intervene in LCBO/AGCO business (distracting them from their important work of dismantling our province) and protect TBS? Another "massive" $15,000 campaign contribution? Fear over TBS seeking another remedy for the undue practices of the LCBO? Investigate THAT. Look for answers THERE.No wonder the former head of the LCBO, Andy Brandt, is still furious about the cosy deal. In a revealing interview, he blames his former Tory masters for imposing it from on high because “the government of the day intended to protect The Beer Store.” (More on his candid, damning comments below.)
This is my main problem with Cohn's useless and endless articles on this topic. There IS a story in there. Why in the hell would the government prop up TBS? Why aren't the large grocery chains weighing in on this issue? Is it because TBS employees share a union with a lot of their workers? Why is no one talking to small brewers who have been successful in the TBS system while brewers who have never tested the market get reams of ink?
He just writes some meaningless muckraking in a tone dismissive of anyone this issue effects (he looks down on beer drinkers a lot for someone acting like a supposed advocate for them) and seasons it with his own brand of snooty carpetbagger outrage. It's outright garbage, and I'm embarrassed Ontarians are buying it.
The Ed Clark study concludes that TBS has a very efficient system for distributing and selling beer. Efficient systems lower costs for consumers. Maybe TBS was hoping to impart some of that knowledge to a bureaucracy that routinely overpays manufacturers for their wares intentionally?The document does all this while relying on Orwellian, lawyerly language. The doublespeak demands a double Scotch:
“Working together in the spirit of this framework, the Ontario beer consumer will benefit,” it proclaims, improbably.
"Precisely how beer drinkers shall be gouged." That's hilarious. I thought words meant things, and were meant to be deployed in accordance with those definitions. The words used in this paragraph would seem to indicate that TBS lays out a detailed plan to "fix" prices in this agreement. Note: There is nothing even resembling the sort anywhere in this document. TBS doesn't even set prices. Each brewer big or small sets a price, gets LCBO approval of the price, and then notifies TBS so they can print up the price tickets. All this is done without any input from the retailer.The title seems unintentionally ironic: “Serving Ontario Beer Consumers — Framework for Improved Co-operation and Planning Between the LCBO and BRI (Brewers Retail, Inc., The Beer Store’s formal corporate name).”
Its bureaucratic wording spells out precisely how beer drinkers shall be gouged. The core of the scheme comes in the section that sharply delineates “Beer Selling Roles” for the two rival distributors — one government-owned and the other privately run — to sharply limit any competition between them.
“Consistent with historical practice, LCBO will not sell beer . . . in packages containing more than 6 containers,” the document declares.
Why would the LCBO agree to tie its hands in such a way? Why give up the right to sell more affordable 12-packs or two-fours (cases of 24) that make up the largest volume of beer buying in Ontario?And why would the publicly owned LCBO further agree that it “will not promote beer at price points greater than 6 containers?” The effect, of course, is to deny drinkers the cost savings of a 12-pack or two-four available at the privately-run Beer Store, forcing them to pay the higher tab for each individual six-pack.
He DOES have a good question there. Why WOULD the LCBO acquiesce on sales of larger packages? Was it a backroom Harris government conspiracy? Did TBS have some kind of leverage over the LCBO? Can we get a reporter covering this issue who wants to actually delve into it and ask some freaking questions instead of bloviating? Why did The Star allow Robyn Doolittle to leave? She broke the Rob Ford story, I'm sure she could find some answers on this topic.
Of course, all this anger over LCBO locations not being allowed 12s and 24s is ridiculous. Do you know why?
The LCBO carrying 12s and 24s IS RIDICULOUS.
I can safely assume that Cohn has never actually been in a TBS location. Larger packages, and higher sales volume packages take up a lot of space. They dominate TBS locations. I haven't been in an LCBO yet that can afford to allot that much floor/shelf space to new product. They already have to reject small brewers looking to add new products to their stores given current space constraints.
Let's just say that the LCBO WERE to lose their minds and start selling 24s. What do you think will be cut from shelves to make room? Hiram Walker, Seagrams, and Diageo products? Or Ontario wines from smaller producers? Unique spirits? Rare vintages? Or... and this is really funny... CRAFT BEER? Do you think they would prefer to make more room for more redundant SKUs of something safe that sells like Canadian, or a new seasonal release from Beau's or Great Lakes Brewery?
Here's the thing: The exact same alcoholic product in Ontario costs the exact same price EVERYWHERE. BY LAW. The LCBO cannot compete by having a lower price, so what's the point? To move more volume? They can't handle a substantial volume of beer without gutting their selection (and hiring a staff that can lift more than 40 ounces at a time.) What's in it for them? Most people who refuse to make two trips just buy it all in 6-packs anyway. I've seen this happen in LCBOs located in the SAME PARKING LOT as a TBS. Why do we need to cater to these people? Take their 6-pack money!
Maybe the LCBO conceded this issue because they see how ridiculous such a scenario would be. Not as ridiculous as using a substantial journalistic pulpit to frame this item as an attempt to gouge consumers, though.
I will admit this: The prices charged to licensees is too high. However, that is set by the individual brewers, NOT TBS. If you don't like the prices, don't buy Molson and Labatts products. Beers brewed by Wellington County are sometimes CHEAPER for licensees. Steam Whistle and Mill Street are nearly the same. That's a good way to support craft brewers at the same time as you make your stand.Another clause spells out the architecture of noncompetition: The LCBO will not sell to restaurants and bars any of the major brands not carried in its regular stores, thus giving the big brewers unchallenged power to gouge the food and beverage industry with their market muscle (which they do by setting prices, and profit margins, unconscionably higher than in most other provinces or in regular Beer Store outlets).
Forcing licensees to buy from TBS isn't a nefarious scam. It's because, for a very long time, you were not allowed to buy smaller packages on a liquor license. The POS at TBS will not allow a licensee to buy certain products. This is either because no price point exists for that product, or the LCBO does not allow sale of that product to licensees. They are also not allowed to buy promo packages like mixed cases (Get2Gether or Sleeman Selections) or promo sizes (like 15s or 28s.) Again, nothing nefarious, just a few quirks in the system. It is better than it used to be at the time the agreement was drafted. Licensees can now buy 6-packs of a lot of products where they couldn't before.
Again, the price would be the same at the LCBO, TBS, or direct from the brewer. To frame this as retail gouging by TBS specifically is disingenuous.
Sales territories are also sharply circumscribed: If The Beer Store decides to move into growing communities, the LCBO will retreat to make way: “Existing LCBO store is to revert to a … 6-pack store and will carry package sizes no greater than 6 containers.”
Yes, because that's exactly how the first sentence informs the second. The first sentence did say "Parties will convene if there is a future issue, and a decision will be dictated by BRI" right? Wait, it didn't? Words mean things?Oh, and if The Beer Store disagrees with the LCBO on key points, they will operate by “consensus on all issues,” and a joint committee’s decisions “shall be consensus (sic).”
The brewers say jump, and the government asks how high.
Why would our elected public officials give private profiteers a veto? Why hamstring the LCBO’s future growth by binding it to past “historical practice?”
To understand why the LCBO would abide by such a self-defeating agreement, I put the question to its former CEO and chair, Andy Brandt: Why go along with the document 14 years ago?
Brandt tells me he did it under direct orders of the Tory government of then-premier Mike Harris in mid-2000. A former Tory cabinet minister himself from the Bill Davis era, Brandt had been appointed to the influential LCBO post in 1991 by then-NDP premier Bob Rae.
Brandt believes the Harris Tories acquiesced to intense pressure from the privately-owned Brewers Retail, which was plainly spooked about the erosion of its longtime monopoly position. The LCBO had been stocking more beer in its newly renovated outlets, stealing market share from the shabby stores in the Brewers Retail chain.
Despite outdated facilities stuck in the 1950s, the document uses laughably ironic language to advance the fiction that Brewers Retail was investing to “modernize” its storefronts. In reality, it was falling far behind the LCBO, as Brandt points out — and as any unfortunate Beer Store customer can attest.So, TBS is "spooked": HOW did they leverage the government, and WHY did the government force themselves to accept such one-sided terms? Journalism! Look into it!
And again with the "shabby stores" argument. Maybe the LCBO allowing TBS to open shiny new outlets instead of rejecting any notion of expansion prior to this agreement might have helped there. Maybe cities like Barrie growing from 35,000 people in the 80's, to 79,000 in the 1996 census, to 103,000 in 2001 would have had nicer TBS locations if they weren't bursting at the seams and not allowed the relief of new stores. Barrie did eventually get 2 new stores; and both are bright, clean, and attractive (even if I hate the Ice Cold Express format of one of them.) Almost every "shabby" TBS location is in a small town or is a low volume store. TBS would love to mark every dated store for renovation, believe me, but it's hard for a company threatened with extinction by various pitchfork-wavers on a weekly basis that DOES NOT profit from their sales to undertake such a project.
In yet more fulsome language, the agreement’s covering letter proclaims, “We are confident that by working together in the spirit of this framework, the Ontario beer consumer will benefit.”
"Nothing could be further from the truth"? The stench of invective in Cohn's writing makes my eyes twitch.Nothing could be further from the truth — then or today. Just ask Brandt, who still grumbles that the government imposed the deal on him.“That was a government decision, that was not my decision — that was not an LCBO decision,” he tells me on the phone from Sarnia.“I never quite understood why the government always wanted to protect the (big) beer industry,” Brandt fumes.But he has his suspicions: “The government had some kind of a deal with Brewers Retail.”
Maybe do some actual journalism and find out that TBS went to the table to, yes, actually provide better services for the Ontario beer drinker. As crazy as it sounds, as the major retailer of beer in Ontario, TBS wants to do a good job serving Ontario. To give them fresh new stores in booming areas to browse more shelves filled with a greater selection of beer. To allow them to buy single 473mL cans of beer at TBS instead of being told "Sorry, that's LCBO-exclusive" when they unringed 6-packs of tall boys and brought them up to the cash where a TBS CSR no doubt was just as confused as to why this wasn't possible as the customer was. Because the LCBO is an inefficient, bureaucratic Crown corporation and TBS is a well-oiled beer-moving machine; that's why. TBS had enough and brought them to the table to improve things for everyone's benefit.
A former interim leader of the Progressive Conservatives before Harris, Brandt believes — as many others do — that election campaign contributions by the big brewers motivated the government’s decision: “That obviously has some influence.”
Bob Runciman, who at the time was minister of consumer and commercial relations responsible for the LCBO, confirms that he wanted the deal done. But he dismisses the allegations about coming under undue influence by the beer lobby.
“I don’t remember that, if it happened,” Runciman said about the Beer Store perhaps getting its way by buying its way. “I doubt it happened, but they do donate to both parties . . . I don’t really believe it was a significant factor.”
Now a senator, Runciman says he always acted in the best interests of consumers to ensure orderly sales.Unsurprisingly, that’s what The Beer Store says, too.
Apparently, the secret deal was drafted “to facilitate the orderly modernization of Ontario’s beverage alcohol retailing system,” according to a statement sent to me by Jeff Newton, head of Canada’s National Brewers, the industry lobby group that represents The Beer Store in media dealings.
The absurdity of a government entity being strong-armed by a private enterprise into making a "sweetheart deal" for themselves makes more sense to this guy than the very basic truth. His slant makes me want to cut my wrists with Occam's Razor. Bob Runciman says that nothing shady happened, Jeff Newton tells him that the government (obviously!) had the advantage in a retail head-to-head competition, and he's still seeing the worst in entities he's predetermined that he doesn't like.He argues that the LCBO was constraining the growth of Brewers Retail, not the other way around. But doesn't it look like collusion, I ask Newton, to sign a deal that benefits The Beer Store by preventing the LCBO from selling beer in higher volumes at lower prices?
Because "collusion" is a very serious legal term and not to be bandied about lightly. You know, something good and ethical journalists think through before spewing their opinions.
Newton's emailed statement doesn't respond to the collusion question, countering instead: “Clearly Ontario's alcohol retailing system and the Framework Agreement are working.”
However, a law firm representing The Beer Store contacted the Star the next day to comment on the collusion question that Newton had left unaddressed: “This is an inaccurate and inappropriate characterization, to which my client objects.”
Nothing in the agreement refers to prices whatsoever, which TBS has ZERO say in. The only reference to volume (aside from the 12/24-pack thing) is as a trigger clause for TBS to be allowed to enter a community. Brandt's chafing seems to be regret over being out-negotiated. The wounded pride of a former LCBO exec is not something that should concern most Ontarians.Brandt doesn’t buy what Newton is selling. He chafed at the price and volume restrictions imposed on the LCBO, which conferred an unfair advantage on Brewers Retail.
If only a recent government commissioned study (referenced in the next paragraph, hilariously) didn't already say that Ontario makes more money off the sale of beer at TBS than the same sale at the LCBO. Those fancy LCBO stores aren't free, but to the government, TBS locations and the gigantic taxes their sales generate are.If not for those constraints, “We would have knocked the sales of The Beer Store significantly,” Brandt says, but what rankled him most was a misallocation of revenues:
Rising LCBO profits went straight to the government treasury to fund hospitals, schools and infrastructure. By contrast, The Beer Store’s profits go straight into the coffers of its private (no, not government) owners, whose corporate parents are now based abroad (Labatts, which is owned by AB Inbev of Belgium, plus U.S.-owned Molson-Coors and Japanese-owned Sleeman).For years, The Beer Store has maintained close to 80 per cent market share because of its control over volume sales of major brands in its chain. The LCBO has been held back to just over 20 per cent, but insiders believe it would make major inroads without the protectionist pact that benefits the big brewers.
Also, drink if you see Molson-Coors referred to as an American company. That's news to the Molson family. I knew it was a matter of time before the US tried to annex Montreal, I just didn't know it was official yet.
Here's a fun way to weed out the noise from "journalists": If they refer to the 50% Canadian-owned Molson-Coors company as "American" or "100% foreign owned" or "Based in Colorado" then disregard anything else they say on the topic. It's the same as the Van Halen brown M&Ms rider: If they got that very basic thing wrong, then who knows what other things they screwed up or misrepresented.
At long last, the sweetheart deal is facing more publicity and scrutiny. Earlier this year, the Liberal government asked former TD Bank CEO Ed Clark to maximize the value of major government assets, including the LCBO. He responded by examining its interlocking relationship with The Beer Store, and recommended allowing the LCBO to sell 12-packs for the first time — but not the high-volume cases of 24 that generate handsome profits for The Beer Store.“We don’t want to undermine its economics by allowing the LCBO to sell cases of 24 — the bulk of Beer Store sales,” Clark noted inexplicably in a speech last fall. He also proposed a franchise fee to retain its monopoly clout (sources tell me the annual take would be less than $100 million).
It's nice and all that Restaurants Canada decided to make up a number, but you didn't have to put it in your column. I have to argue on Twitter with people who think that number is real and/or credible because an actual newspaper printed it! Even if it's the Toronto Star! TBS makes $3 a case to cover their overhead, by the way. That's a hell of a lot of cases to move to make up that amount. Every Ontario beer drinker would have to consume like Andre the Giant every day and TBS' operating costs would have to drop to zero, basically.
Package sizes are a big deal, because they are big money.
Ripping up the deal to let the LCBO sell both 12-packs and cases of 24 would “provide the government with a new revenue stream” estimated at $515 million a year, according to Restaurants Canada, which represents the food and beverage industry.
The proposed shakedown of TBS/"franchise fee" warrants its own post.
In a submission to Clark’s task force last summer, it questioned why the government still lets the private brewers siphon off massive profits by charging its members much higher prices than retail consumers pay. Its brief argued that another $500 million could accrue to government if the LCBO were allowed to sell all brands of beer in cases of 24 directly to bars and restaurants.
That adds up to total of $1 billion in foregone revenue that could flow to the LCBO but is now captured by the private brewers thanks to their protected position.Thank you sir, may I have another half billion? I misread this the first time and didn't realize the restaurant lobby group invented TWO streams of a half billion dollars in imaginary money! Seriously, how would they even begin to know? They have no access to any hard numbers whatsoever except the price they pay on product, but those figures get printed in the Star like they came from a TD Waterhouse audit. Furthering an agenda seems like a really freeing experience. Forget logic and facts, and just let it all out!
Don't spread the idea that lobbyists paying $17,000 can buy that much influence. Do you REALLY want to invite the Koch brothers up here? They could buy Canadian approval of Keystone XL for like 30 grand! The could build another pipeline to send all their waste from the US into Hudson's Bay for another 50! Don't you bring that evil on us, Cohn!Why would the government agree to act as an enabler and enricher of the private profiteers who run The Beer Store — perpetuating its oppressively Stalinist architecture, Soviet-style service, and ossified corporate design? What’s keeping today’s Liberal government from undoing the bad deal cooked up by the Tories in 2000?
Sadly, it’s simple. Both political parties profit shamelessly from generous campaign donations, and both are easily seduced by powerful lobbyists. The brewers have snapped up virtually every big name influencer in town, many of them former Liberal party operatives.
Either they are ridiculously corrupted by moderate sums of money, or you are too lazy to find out the actual reasons why no one is changing the alcohol system in Ontario. Maybe it's because people with access to the facts know it works really well!
While the Liberal government ponders a few half measures, the prominent Tories who first constrained the LCBO 14 years ago now believe their protectionist pact is outdated: “I think it should be looked at,” Runciman says today. “Loosening it up would be welcome by most people.”
Anyone who had to be subjected to a media circus for the last two weeks thanks to an innocuous document are the ones who should be weeping.Remarkably, The Beer Store’s sweet deal has been kept secret all this time. Now, with the holiday party season upon us, we can read it and weep.
I weep too. I weep for everyone who has to share a province with the people who bought this story.
EDIT: Added a link to the actual agreement, which I somehow forgot initially. Sorry. It's a light read! It is only ten pages, after all!
